Life insurance stamp duty on the way out

Victoria has joined the ACT by abolishing stamp duty on life insurance and the rest of Australia should follow, the Financial Services Council (FSC) says.

The ACT axed the "inefficient" duty in 2013 and Victoria's 2014/15 budget does the same.

FSC chief executive John Brogden says it is a positive move towards eliminating inefficient taxes and red tape.

"Victoria now leads the country in tax reform," he said on Tuesday.

"We hope other governments in Australia can follow this lead."

The FSC argues much of the revenue generated by the stamp duty is eaten up by the costs to government and industry associated with collecting the tax.

Victorian Treasurer Michael O'Brien said the duty payable on life insurance would be abolished from July 1, saving consumers $16 million over four years.